The stream of costs and benefits associated with two proposed natural resource projects in Prince Edward Island
Question:
The stream of costs and benefits associated with two proposed natural resource projects in Prince Edward Island are presented in the tables below:
Project PEI-Sweet Beach
Year 0 | Year 1 | Year 2 | Year 3 | |
Costs | $4,000,000 | $2,000,000 | $1,000,000 | $0 |
Benefits | $7,000,000 | $8,000,000 | $8,000,000 | $8,000,000 |
Project PEI-Recreational Watershed
Year 0 | Year 1 | Year 2 | Year 3 | |
Costs | $6,000,000 | $4,000,000 | 2,000,000 | $0 |
Benefits | $12,000,000 | $9,500,000 | $8,000,000 | $6,000,000 |
- If the interest rate is 10%, use an Excel file to compute the net present values (NPV) of the two projects. Report your NPV results below
NPV for Project PEI Sweet Beach =
| |
NPV for PEI-Recreational Watershed =
|
2. If the interest rate is 10%, which project would you advise the PEI government to implement and why?
3. If the interest rate is 5%, use an Excel file to compute the net present values (NPV) of the two projects. Report your NPV results below
NPV for Project PEI Sweet Beach =
| |
NPV for PEI-Recreational Watershed =
|
4. If the interest rate is 5%, which project would you advise the PEI government to implement and why?
Practical Management Science
ISBN: 978-1305250901
5th edition
Authors: Wayne L. Winston, Christian Albright